The official puppet show begins, narrated by a boy who tells the story of Señor Gaiferos who frees his wife, Melisendra, daughter of Charlemagne, from the Moors, who then pursue the fleeing lovers; unfortunately, Don Quixote suddenly feels compelled to assist the fugitives by drawing his sword and slashing the paste Moor puppet figures to pieces and sending the audience into cover. Master Pedro is in tears at the sight of his ruined livelihood, and Sancho consoles him by assuring him that Quixote would compensate him for the damage, which he does, as he comes to his senses that once again enchanters have enchanted him.
It is revealed that Master Pedro is Ginés de Pasamonte, the gallery slave freed by Don Quixote in Book I who also stole Sancho’s mule. At dawn, Quixote and Sancho travel to Saragossa to witness the great battle of the braying village, though Quixote attempted another long monologue of the theology-type in order to convince the villagers to cease such a childish; however, Sancho agrees and demonstrates his braying capabilities to show how childish it truly is, but one villager believes he is mocking them, and he gives him a blow. As Quixote tries to retaliate, it becomes obvious quickly that there are many more of them than knight and squire could handle, and they fled.